JSE could recover slightly on Tuesday as trade war ebbs and flows

South African stocks could open slightly higher on Tuesday, with investors taking some comfort in the fact that the trade war between the US and China has not escalated further since the weekend.

Global stocks fell sharply on Friday and early Monday as trade tensions between the world’s two largest economies flared up. But risk sentiment improved slightly through Monday as representatives from both the US and China sought to reassure the market that a deal could still be reached.

With the G7 summit on the go, the S&P 500 Index closed 1.1% up on Monday after declining sharply on Friday.

The relief rally came “even if there is perhaps a degree of scepticism regarding the likelihood of any concrete near-term progress” in the trade war, analysts at ANZ Banking Group said in a note.

“More positive noises out of US-Japan trade may also have helped sentiment, with a goal of signing a pact in September that cuts Japan’s tariffs on pork and beef and increases purchases of wheat and corn, in exchange for no change to US tariffs on Japanese cars,” the bank said in a note on Tuesday.

Asian markets were mostly higher on Tuesday. Hong Kong’s Hang Seng Index was 0.1% up and the Shanghai Composite gained 1.7%, while Japan’s Nikkei 225 rose 1.1% and Korea’s Kospi 0.7%. Australia’s main benchmark added 0.7%.

WeChat-owner Tencent, which is 31% owned by Naspers, was 0.2% up in Hong Kong. JSE-heavyweight BHP Group was 1% up in Australia.

Meanwhile, Imperial Logistics is due to report annual results on Tuesday. The company has warned that continuing headline earnings per share fell by up to 9% in the year to end-June.

It blamed weaker performances on “challenging trading conditions”, once-off trading costs in the international division and once-off costs from a “rationalisation and restructure” programme.

No major data releases are expected locally on Tuesday. In the US, house price indices and consumer confidence readings are due.

The rand was slightly firmer on Tuesday morning as risk sentiment improved somewhat. The local currency was trading at R15.28/$, R18.67/£ and R16.97/€.

Gold, which has benefited from uncertainty, was at $1,528.32/oz. 

“Rising economic uncertainty and falling interest rates have triggered increased investor interest” in gold, ANZ analysts said. “With the interest rate cycle turning lower, central bank purchases have risen and the recent pick-up in investment demand should continue.”

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